The Cost of Covering Contraceptives through Health Insurance

This brief reviews the literature on the cost of contraceptive coverage
in private and public health insurance programs. This brief was written
by John Bertko, F.S.A., M.A.A.A., Director of Special Initiatives and Pricing
in the Center for Consumer Information and Insurance Oversight at the Centers
for Medicare and Medicaid Services; Sherry Glied, Ph.D., Assistant Secretary
for Planning and Evaluation, U.S. Department of Health & Human Services
(ASPE/HHS); Erin Miller, (ASPE/HHS); Adelle Simmons (ASPE/HHS); and Lee Wilson
(ASPE/HHS).

This Issue Brief is available on the Internet at:
http://aspe.hhs.gov/health/reports/2012/contraceptives/ib.shtml

In August 2011, the Department of Health and Human Services (HHS) published
Guidelines on Womens Preventive Services that will require
non-grandfathered health insurance plans to cover certain recommended preventive
services for women, including contraceptive services, without charging a
co-pay, co-insurance or a deductible beginning in August of 2012. The
Guidelines are based on recommendations to the Department from the Institute
of Medicine, which relied on independent physicians, nurses, scientists,
and other experts as well as evidence-based research to draw conclusions
and formulate its recommendations. The Guidelines provide for an exemption
for certain religious employers, which is modeled on an option available
in some of the 28 states that already require coverage of
contraception.[1]
Additionally, the Administration announced that non-profit, religious employers
who do not currently offer contraceptive coverage would not have to comply
with the requirement for a year and new regulations would be developed and
finalized by the end of the year to accommodate religious concerns while
ensuring access to this benefit.

While the costs of contraceptives for individual women can be substantial
and can influence choice of contraceptive methods,[2]
available data indicate
that providing contraceptive coverage as part of a health insurance benefit
does not add to the cost of providing insurance coverage.

Evidence from well-documented prior expansions of contraceptive coverage
indicates that the cost to issuers of including coverage for all FDA-approved
contraceptive methods in insurance offered to an employed population is zero.

In 1999, Congress required the health plans in the Federal Employees Health
Benefits (FEHB) program to cover the full range of FDA-approved contraceptive
methods. The FEHB
program is the largest employer-sponsored health benefits program in the
United States, and at the time, it covered approximately 9 million Federal
Employees, retirees and their family members and included approximately 300
health plans. The premiums for 1999 had already been set when the
legislation passed, so the Office of Personnel Management (OPM), which
administers the FEHB program, provided for a reconciliation process.
However, there was no need to adjust premium levels because there was no
cost increase as a result of providing coverage of contraceptive
services.[3]

Also in 1999, Hawaii prohibited employer group health plans from excluding
contraceptive services or supplies from coverage, requiring them to include
FDA-approved contraceptive drugs or devices to prevent unintended
pregnancy.[4] A report
on this experience by the Insurance Commissioner of Hawaii concludes that
the mandate did not appear to increase insurance costs in any of the four
surveyed health plans in Hawaii servicing employer
groups.[5]

The direct costs of providing contraception as part of a health insurance
plan are very low and do not add more than approximately 0.5% to the premium
costs per adult
enrollee.[6] Studies
from three actuarial firms, Buck Consultants, PriceWaterhouseCoopers (PwC),
and the Actuarial Research Corporation (ARC) have estimated the direct costs
of providing contraception coverage. In 1998, Buck Consultants estimated
that the direct cost of providing contraceptive benefits averaged $21 per
enrollee per year.[7]
PwC actuaries completed an analysis using more recent, 2003 data from MedStat
for the National Business Group on Health, and determined that a broader
range of services (contraceptive services, plus lab and counseling services)
would cost approximately $41 per
year.[8] The most recent
actuarial analysis, completed by the Actuarial Research Corporation in July
2011, using data from 2010, estimated a cost of about $26 per year per enrolled
female.[9]

However, as indicated by the empirical evidence described above, these direct
estimated costs overstate the total premium cost of providing contraceptive
coverage. When medical costs associated with unintended pregnancies
are taken into account, including costs of prenatal care, pregnancy
complications, and deliveries, the net effect on premiums is close to
zero.[10],[11] One study author concluded, "The message
is simple: regardless of payment mechanism or contraceptive method, contraception
saves money."[12]

When indirect costs such as time away from work and productivity loss are
considered, they further reduce the total cost to an employer. Global
Health Outcomes developed a model that incorporates costs of contraception,
costs of unintended pregnancy, and indirect costs. They find that it
saves employers $97 per year per employee to offer a comprehensive contraceptive
benefit.[13] Similarly,
the PwC actuaries state that after all effects are taken into account, providing
contraceptive services is
cost-saving.[14]

Providing contraception through public programs is also cost-saving.
Each year, public funding for family planning prevents about 1.94 million
unintended pregnancies, including almost 400,000 teen pregnancies.
Preventing these pregnancies results in 860,000 fewer unintended births,
810,000 fewer abortions and 270,000 fewer miscarriages. More than nine
in 10 women receiving publicly-funded family planning services would be eligible
for Medicaid-funded prenatal, delivery, and postpartum care services upon
pregnancy. Avoiding the significant costs associated with these unintended
births saves taxpayers $4 for every $1 spent on family
planning.[15]

During the 1990s, many states implemented Medicaid Section 1115 Family Planning
Demonstrations. An independent evaluation of the experience of six
of these states found that all six Demonstrations yielded savings, with annual
state savings ranging between $1.3 million in New Mexico and nearly $30 million
in Arkansas.[16] As
of August 1, 2010, 27 states, including States like Pennsylvania, Texas,
Florida, and Virginia had expanded Medicaid eligibility for family planning
services under waivers that stipulated that these expansions be budget
neutral. Based on this experience, the Congressional Budget Office
has estimated that expanding family planning to all States would save $400
million over 10 years.[17]

[1] The Guidelines were published
alongside an amendment to the July 2010 Preventive Services Rules that required
non-grandfathered health plans to cover certain recommended preventive services
without cost-sharing. The amendment to the July 2010 preventive services
regulation exempts health plans sponsored or offered by certain religious
employers from the requirement to cover contraceptive services.

[3] National Womens Law
Center, Covering Prescription Contraceptives in Employee Health Plans:
How this Coverage Saves Money, May 2006, available at:
http://www.cluw.org/PDF/ContraceptiveCoverageSavesMoney.pdf;
(accessed: February 8, 2012) and Letter from Janice R. Lachance, Director,
U.S. Office of Personnel Management to Marcia D Greenberger, National
Womens Law Center.